U.S. property and casualty insurers overall saw better underwriting results in 2023, but performance worsened in certain important business lines, according to an analysis by S&P Global Market Intelligence.
The property and casualty (P&C) industry’s overall net combined ratio declined to 101.7% in 2023 from 102.5% a year ago. Better underwriting results within private auto insurance contributed to that small underwriting improvement while commercial auto, several commercial liability lines and homeowners reported year-over-year deterioration in their combined ratios.
The combined ratio for the industry’s personal business lines, which include private auto, homeowners and farmowners insurance, came in at 106.7%, an improvement from 109.9% in 2022. Commercial lines posted a net combined ratio of 96.2% in 2023, up about 1.5 percentage points year over year.
Personal lines
After a historically poor year in 2022, underwriting performance of private auto insurers improved by about 7 percentage points in 2023 to 104.9% thanks to higher premium rates and expense reductions.
Homeowners insurers posted their worst net combined ratio in at least a decade, at 110.9% in 2023. While a mild hurricane season gave Florida homeowners insurers a reprieve, those in Hawaii were impacted by a devastating wildfire. Aon PLC in its 2024 Climate and Catastrophe Insight report estimated losses of $3.5 billion from the Hawaiian fires. The US also experienced a record-setting year in 2023, with 21 billion-dollar insured loss events due to convective storms. Overall, convective storms racked up $58 billion in insured losses.
The segment’s combined ratio was significantly worse than the last 10 years’ previous high of 107.2% in 2017 when several major hurricanes battered multiple parts of the Atlantic Coast and wildfires raged in California.
Commercial lines
Four commercial liability business lines recorded worse combined ratios year over year. The long-tailed casualty business has been impacted by social inflation in recent years as increased litigation costs, plaintiff-friendly judgments and higher jury awards increased insurers’ claims severity.
Product liability reported the largest year-over-year deterioration of the four selected as-reported lines of business: commercial multiperil (liability), medical professional, product and other. The line reported a combined ratio of 100.0% compared to 89.3% in 2022.
Commercial multiperil and medical professional liabilities lines reported combined ratios of about 110% in 2023.
The commercial auto liability (other commercial auto liability and commercial auto no-fault) line of business also reported worsening results. The aggregated commercial auto liability lines combined ratio rose to 113.3% in 2023, its highest level since 2019. The net combined ratio of commercial auto physical damage coverage actually improved by nearly 4 percentage points, declining to 96.1% in 2023.
Deteriorating results in commercial auto liability pushed the total commercial auto business line’s combined ratio up to 109.2% in 2023, marking the ninth year out of the last 10 that the commercial auto sector posted underwriting losses. The only year of underwriting profitability in the last decade was 2021, during the height of the COVID-19 pandemic.